Michael Moore, Esq. Director McKenzie HR Solutions Printer Friendly Version

Financial Considerations to Staff – Pitfalls

Do you allow staff to carry a balance for treatment you give them and their families? A lot of our doctors do. Do you keep track of the current balances? A lot of our doctors don’t. Do you allow one person in the office to handle the accounts? Most doctors do. Do you have a written policy that addresses how you are to be paid back if your employee resigns or is terminated? Few doctors have considered that contingency. This has meant the loss of hundreds of dollars for some doctors.

Here’s what we heard from one doctor recently. For some years, he had a trusted office manager handling the accounts. Let’s call her Sue. A couple years ago, Sue informed the doctor that she had gotten married to John. John needed dental work, and the doctor was glad to provide it. For many years, he gave staff treatment at reduced cost, and allowed them to pay off the bill over time. He had no written policy on this benefit. Sue handled the accounts. One day, Sue abruptly quit. Only after the separation did the doctor learn that Sue and John had not married, but were only living together. He immediately turned to the books, and found that Sue and John had an accrued a balance of several thousand dollars.

The first question that the doctor had for us was: Can I apply Sue’s last check to pay part of the balance owed? His second question: How do I get her to pay the rest?

The answer to the first question is No – according to the wage and hour law of your state. The answer to the second question is How serious are you? – Because you may have to file criminal charges for fraud.

In short, the doctor faced the prospect of a drawn-out and potentially nasty fight to recover the money he was owed. Ultimately, he decided to take the hard lesson. He immediately implemented a new policy that will prevent this kind of theft – because that is what it is – in the future.

Now the situation with Sue is admittedly extreme. But in the last months, with the impact of the economic downturn, we’ve seen too many of these kinds of separations – where the doctor is shocked to learn what the employee owes. And the second shock is the recognition that there is no way to recoup the value of his or her work.

Here’s how to prevent losing money on staff treatment. First, have a written policy covering the practice – which includes, at the very least – what the benefit is; who is eligible; and the repayment requirements. The last provision must provide that the doctor can, at any time, require the staff member/patient to repay the full amount owed.

Second, require a monthly report of the balances owed by each staff member. If you have your accountant provide a quarterly report on the practice’s financial condition, it is a good idea to have the accountant review this report.

Third, make sure that the person who approves the reduced-cost treatment is not the same staff member who does the accounting.

Fourth, have each staff member execute an authorization for the practice to deduct amounts owed to the practice from paychecks. Under virtually all state wage and hour laws, it is lawful to deduct such amounts from pay only with prior authorization from the employee.

With these controls in place, you should not incur any losses from your generosity. We recommend that the policy provide a maximum limit that the employee can carry on the balance owed. And, the policy should require the employee to begin paying on the balance through the payroll deduction beginning the first pay period after the charge is incurred.

By having the policy in place, if you begin to see performance problems or behavior issues with any staff member which raise concerns that you may have to terminate that person down the road, you can make sure the balance is paid down before the break comes.

Mike Moore is ranked among the best in employment law and has been named one of the top 10 lawyers in Ohio. As Director of McKenzie's HR Solutions, Mike is the creator of the Employment Policy and Handbook, geared to providing dentists who are unsophisticated in the legal arena with a step-by-step policy manual.

Click here to hear Mike present “7 Elements of an Effective Employment Policy.” Email Mike at mike@thedentistsnetwork.net.

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